This last week had been a turbulent week in Indonesian Oil
& Gas, the week that will have profound consequences for the industry.
Unexpected arrest of Rudi Rubiandini, the head of SKK Migas, Indonesia’s
upstream oil and gas regulator, shocked everyone. He has been detained by the
country’s antigraft agency for allegedly taking a bribe from a foreign company.
While it is too early to make any judgments and conclusions, one thing is sure –
some reforms of Oil & Gas in Indonesia are eminent. For those interested in
coverage of the events – please, follow me on Twitter (@VladimirK20), where I
tried to keep an eye on the press reports as the events were rolling out.
SKK MIGAS
It is quite naturally, that this mentioned event, triggered
the scrutiny of SKK Migas and its activities, some calling to immediately
disband the agency, other to revise thoroughly its activities. It was
established by Regulation
#9 of 2013 of the President of Indonesia. According to Regulation, the
role and management of the upstream Oil & Gas Sector by SKK Migas is overseen
by a supervisory body that consists of Minister and Deputy Minister of Energy
and Mineral Resources, the Deputy Minister of Finance and the Head of the
Investment Coordinating Board. SKK’s Web-site
gives this structure
While 2012
Annual Report provides basic data on activities, structure and
operations, this slide in condensed form states objectives
Source: 2012
PERFORMANCE & 2013 WORK PROGRAM, by Rudi Rubiandini R. S., Chairman
of SKK Migas
OKEZONE
media provides the following tasks that were performed by Rudi
Rubiandini
1. Giving consideration to the Minister of Energy and
Mineral Resources discretion in terms of preparation and offers of Work Areas
and Cooperation Contracts.
2. Implement execution of Cooperation Contract; review
and submit field development plan to be produced in a Work Area to the Minister
of Energy and Mineral Resources for approval.
3. Approving development plans than those referred to
in the previous point.
4. Approve the work plan and budget
5. Implement monitoring and reporting to the Minister
of Energy and Mineral Resources on the implementation of the Cooperation
Contract
6. Pointing sellers of petroleum or natural gas part of
the country that can provide maximum benefits for the country.
So, let us watch the further developments…
Concern for Foreign Energy Dependence
Suara
Pembaruan reported that foreign companies hold 70% of oil and gas
mining, 75% of mining coal, bauxite, nickel, and tin; 85% of copper and gold
mining; 50% of palm oil plantations. Pertamina, being the state Oil &
Gas company controls 17% of national production and reserves; 13% is the share
of national private companies. This was revealed by member of CPC Masykur Ali
Musa.
Pertamina Overseas Oil Development
Pertamina is working on expanding its operational portfolio
to increase Oil & Gas production. So
far, there is no very positive record overseas. However, the
latest development seems to be very promising. Concurrently with stimulation
of exploration in Java, Sumatra, Borneo, Pertamina
agreed to buy stakes in three Algerian oil fields from ConocoPhillips
for $1.75 billion, producing 23,000 bpd. This is the largest overseas program
for the company; following last year’s failure
to buy Houston-based Coastal
Energy Co.
Currently, Pertamina through Pertamina Hulu Energi (PHE)
has 8 blocks in 7 countries. These are:
- Petronas Carigali and Petrovietnam - Block SK 305 in Sarawak, Malaysia. Pertamina has 30% stake in the block. Mostly natural gas is produced since 2010.
- Petrovietnam Exploration Production Corporation - Block 10 and Block 11.1 in Vietnam. Pertamina has 11.2% share. This is off-shore block in development, which was estimated to produce 6,000 bpd, now it is 2,000 bpd; for gas – 200 million mmscfd
- Block VIC, Australia – 10% stake in this off-shore block; producing 100 bpd – not economically feasible.
- Block 3 in Qatar – 25% stake, owned by Pertamina, Winershall AG, Cosmo energy, E7D Ltd. In geological and geophysical exploration. Estimated production in 2013.
- Block 13 in Sudan – 15% stake in block located off-coast. Unexplored.
- Block 3-WD in Iraq - 100% share. No exploration license due to emergency state in country.
- Block 17 and Block 123-3-3 in Libya - 100% in both Blocks. No exploration license due to emergency state in country.
Of the entire blocks owned, Blocks SK 305 and VIC are the
only producing.
Pertamina Domestic Gas Development
PT Pertamina is planning to invest U.S. $ 2.1 billion for 10
gas projects located in Sumatra, Java, Bali, Kalimantan, Sulawesi, and Papua.
This will also improve existing gas infrastructure. It is planned to be equity financing,
private money or bank funding.
Sumatra - four construction projects:
- Arun Receiving and Regasification Terminal in Aceh (2013-2015)
- Gas pipelines Lhokseumawe towards the Arun field - Belawan Gas Pipeline (2013-2015)
- Gas pipeline Tempino - Plaju in South Sumatra (2013-2015)
- Construction of refinery LPG Plant in South Sumatra, Jambi Merang (2016-2017).
Construction of Gas infrastructure projects in Java
- Gas pipelines Java Integrated Pipeline in Cirebon, West Java (2013-2015)
- Gas pipelines Java Integrated Pipeline in Semarang, Central Java (2013-2015)
- Floating Storage Regasification Unit (FSRU) in the waters north of Semarang
- Mini FSRU in the waters south of Cilacap (2016 – 2017).
Gas infrastructure projects in Eastern Indonesia - LNG plants
on five areas:
- Two refineries in East Kalimantan
- One refinery in Bali
- Two refineries in Sulawesi
- Refinery in Papua.
LNG plant for the vehicles in the area of East Kalimantan
Government-Financed Refinery Project
I covered the issue of Indonesian Oil refineries in my
previous posts:
This week the trend is surfacing that the option for
government-funded refinery becomes more realistic.
Director of fuel oil (BBM) Regulatory Agency for Upstream
Oil and Gas (BPH Migas) Djoko Siswanto blamed international oil mafia as being
opposed to construction of new refineries in Indonesia. Meanwhile, Umi
Asngadah, Director of Downstream Oil and Gas Ministry of Energy and Mineral
Resources revealed that the Government is working now on Regulation that will
set forth the roadmap for new refinery with estimated production of 300,000 bpd.
According to him, Pertamina is working on feasibility study and selection of location,
and expectations are that construction will be done in two years with planned commission
in 2019. One of the most feasible location is South Sumatra. It is expected that
the President will issue a Decree on financing of refinery. As projected
investment is around IDR90 trillion, it will take a couple of years to finance.
In 2013 the Government allocated IDR17 billion perform Feasibility Study, which
will be followed by FEED (will be assisted by Iraq). Of the refining capacity
of 300,000 bpd Iraq will supply a
minimum of 150,000 bpd. Director General of Oil and Gas EMR Hermantoro Edi also
revealed that the government is still discussing incentives for the
construction of two oil refineries in cooperation with foreign investors.
As one of the ways to resolve an issue of stolen oil from pipeline
Tempino (Jambi) to Plaju (South Sumatra) SKK suggest to Pertamina to construct a mini Pertamina refinery in Tempino
to directly process oil. This would cost around U.S. $ 300 million, which is
lower than losses from theft. It was reported that from 12,000 barrels produced
6,000 barrels are stolen.
Operational Update
- The government is still targeting oil production by 1 million bpd in 2014 said Minister Jero Wacik. One of the reasons for such optimism is a hope that in the September 2014 oil production from the Cepu Field could reach 165,000 bpd. Minister revealed that in 2013 the Government expects to produce 830,000-840,000 bpd: there are 80 companies performing pretty good in oil production, 11 companies producing companies over the target, and still 9 below target.
- Cepu Oil Project. ExxonMobil and SKK Migas are sure that the project will peak production of 165,000 bpd in 2014. Currently the Block experiences problems due delays in award and execution of engineering, procurement and construction contracts. Currently the project is around 50% complete. This is in development since 2005, with Pertamina and ExxonMobil having 45% stake in the block, with the local governments sharing the remaining 10% equity. The Cepu project involves five different EPC contracts, four of which are worth a total $1.25 billion and were awarded in 2011. However, several of the EPC works have been delayed due to permit issues and issues of use of local contractors. The Cepu block straddles the border between Central Java and East Java and is estimated to contain a total 600 million barrels of oil and 1.7 Tcf of gas. Production lifespan is from 2017-2035.
- Pertamina EP reported that oil production from Asset 4 Field Cepu exceeded 3,100 bopd. Actual productin on August 18 was 3,182 bopd (154% above the target for August of 1,248). It represent a huge increase, since In January it was 1,687 bopd and 1,474 in February.
- The Government announced that production sharing contract (PSC) for gas development Block East Natuna, Riau Islands will be done this year. Natuna Consortium is led by partners: Pertamina (35%), ExxonMobil (35%), Total EP Indonesie (15%), and PTTEP Thailand (15%). ExxonMobil is the operator with 10-year exploration phase, while Pertamina will be production operator for 40 years. Consortium plans to develop East Natuna gas pipeline scheme using the estimated cost of U.S. $ 24 billion. East Natuna block is estimated to have reserves of 222 trillion cubic feet, with 70 percent of them in the form of CO2, so the backup is actually only 46 trillion cubic feet. East Natuna planned production of 1,200 million cubic feet per day for 30 years. The Government and Consortium are still in negotiating a potential tax waver or tax holiday for the venture.
